Just Another Example...

...of how voice and communications are becoming parts of other experiences. Microsoft will be integrating Live Messenger into the Xbox platform on May 7, linking 260 million Live Messenger users with six million Xbox Live users. Xbox Live users will be able to chat with up to six contacts simultaneously by plugging a USB keyboard into the Xbox.

How Many Retail VoIP Providers Sell $214 million?

Not many. Probably not Skype, which might wind up the year in the $200 million range. Cbeyond does. Which might lead you to conclude a few things about the current state of customer demand for VoIP services. What's the leading approach in the consumer market? POTS replacement. Same phones. Same features.

What's Cebyond's approach? Phone service and Internet access, same phones, plus some additional features such as BlackBerry integration, so an inbound call can be taken at the desk or away from it. As it operates in the small business market (generally no more than 250 users at any single site), Cbeyond can be expected to offer more features than a mass market customer might expect.

But the fundamental approach, which is to use VoIP in the core of the network and retain the analog edge and customer premises equipment, is pretty much the same.

That isn't to say the enterprise market is showing precisely the same adoption pattern. In fact, VoIP "past the edge," all the way to the end user device, increasingly is a familiar pattern. Enterprise IT managers still have concerns, of course, as a recent Network Instruments survey shows. But IP features arguably are more visibly a presence in enterprise markets.

Nor can one infer that "VoIP in the core, POTS at the edge" is the pattern that always will hold. It won't. It just works today, and effectively.

People Aren't Paying Attention

They can't pay as much attention to any single form of media as the total amount of media explodes. Of course, users are going to reduce consumption of less relevant media forms as well. The absolute hard limit is that there are only so many available hours in a day. So as consumers become flooded with more media, they are finding ways to make room for it rather than letting some of it go.

Multitasking, in other words, has become a necessity. Though teens are more likely to do so than adults, it is estimated that 25 to 30 percent of total media time is spent multitasking.

In 2006, 103 million of the 147 million US adult Internet users watched TV while they went online. Nearly 90 million listened to the radio while online, and more than 50 million read magazines while online. Among teen Internet users, 7.3 million of the total 9.4 million watched TV while online, and 6.9 million listened to the radio.

Mobile is Where Innovation Will Happen

...for very simple reasons...VoIP doesn't change the user experience very much on a landline phone. Some people think that is an advantage. On a mobile handset, VoIP is but one element of many many things that can be tweaked and customized in ways the enrich the communications experience. That's in large part because, to an ever-greater degree, mobile handsets are general purpose computing devices, with all that implies for differentiated services and features.

Mobility itself arguably is the single biggest change in voice communications over the last 30 years. But smartphones will provide the platform for the next waves of development, simply because the smart phone is the most-used intelligent edge device, and is deeply embedded into a typical user's life.

In fact, 75 percent of people questioned in a survey by Yahoo! HotJobs said they used their wireless devices equally for work and personal reasons. Nearly 30 percent were so attached to them they only switched them off while sleeping. The online survey of 900 professionals revealed that 81 percent stay connected with a mobile phone, 65 percent use a laptop to keep in touch and 19 percent have adopted smart phones, cell phones with computer-like functions.

Like a network upgrade from mechanical to eletronic switches, or analog to digital, or digital to soft switch, VoIP mostly changes what happens in the core of the network. Analog terminal adapters and network interface units change what happens at the network edge.

Mobile handsets change what happens at the user interface level. And most of the advantages fixed mobile convergence represents will occur as mobile features become usable on the wireless tail of a wireline transport mechanism.

"VoIP isn’t a business category anymore"

...says Alec Saunders in his latest post on http://saunderslog.com/2007/04/05/voip-isnt-a-business-category-anymore/.

"VoIP isn't the reinvention of the telephone which we all foresaw five years ago. At least, not the VoIP peddled by the likes of Vonage. It's ordinary telephone service… delivered on IP. While popular, it has failed to deliver the revolution industry types envisioned. "Innovations" like web-based dashboards are long in the tooth, and the truly revolutionary applications which could have been delivered have never seen the light of day.

It's time to stop talking about VoIP as a business category, or an industry. Companies using VoIP to deliver service to customers are really just one more instance of a competitive service provider, albeit with different tarrifing and competition rules. Viewed from that vantage point, it's no wonder that this "industry" is struggling."

One might add that IP also is simply the way application and service providers--including incumbents of all stripes--are going to deliver features and make money in the future. All of which is simply the latest evidence of a trend underway for a couple years now: VoIP is voice; voice is communications; no more, no less.

Unfortunately, FTTX Doesn't Tell You Much

At some point, there will be a pretty compelling business difference between a fiber to neighborhood, fiber to a node of 16 to 32 homes and fiber directly to the customer. Standard definition TV may persist for awhile in closed environments. Cable operators might even see some business advantage there, as customers can continue to use their analog TVs without any new decoders to receive at least some programming. Of course, the counterweight is that bandwidth taken up by analog prevents efficient use of potential digital bandwidth to provide new services.

But when all terrestrial broadcasting instantly converts to HDTV in a couple years, and cable programmers match the move to avoid being seen as inferior in quality, most linear programming will be in HDTV format (the issue is what cablers will want to do about "standard definition" NTSC signals).

The assumption that just one concurrent HDTV stream will be required by any single home has to be suspect. To some extent, the access network has to be built to the level required by the most demanding user. And while it still makes sense to retain the ability to "spot upgrade" on an incremental capital basis as more demanding customers are signed up, the access network has to support such incremental and spot upgrades. Whether or not all the theoretical bandwidth is presently required, the ability to provide it on demand is something the access network must be built to support.

The option to deploy a "thin fiber" network saves capital investment for the moment, to be sure. Planned properly, fiber then can be incrementally extended deeper into the network. Such rework remains a non-trivial exercise, though.

Also, keep in mind that all discussions about what video might do the backbone of a network is a separate matter from what might be required in the access network. The reason is satellite delivery, regional server farms and other ways of substituting storage for bandwidth, processing for bandwidth, non-real-time delivery (store and forward) and alternate networks. All of these forms of substitution allow for easing the stress on backbone networks. The amount of stress on access networks typically is the real pinch point.

It Will Take Video to Change This

Some 29 percent of U.S. homes--31 million--do not buy any form of Internet access, and 44 percent of the "resisters" says they don't buy service because they are not interested in anything on the Internet, say researchers at Parks Associates. About 22 percent of resisters say they don't buy because they do not own a PC. The U.S. Internet "resister" homes also say they don't plan to buy access for the next year either, say Parks Associates.

Parks researchers also find that most new broadband access subscriptions are coming from dial-up customers who are upgrading, not "newbies." Some 17 percent say they use the Internet at work, and therefore don't need it at home. Of course, if we are to get to universal broadband, it will be driven by entertainment video. You don't find many people objecting to ownership of TVs and TV service for any reason. As the broadband connection becomes the way to get TV, resistance will crumble.

Buying Decisions Hinge on Marginal Value

There's a curious paradox about user perception of value and the actual triggers that push a buyer towards one offering, compared to another. Consider all of the value any user gets from a mobile or fixed line phone, VoIP service, a broadband connection or Web service. When you get right down to it, a phone has to reliably make and receive calls. Perhaps half to 90 percent of the total value is there. The incremental value is provided by all the other attributes of the phone and its features, the calling plan and so forth.

To the extent that "voice" consumed as a standalone subscription service is a commodity, the discrete buying decision still will hinge on other differentiators at the margin. The point is that even a commodity service is not sold as a commodity.

Yes, all phones need to work. But then there's phone color, fit and finish, form factor, keyboard support, push or pull email functions, ease of navigation, screen size, multimedia support and so forth. Some brands are worth more to some buyers. Some users prefer candy bar form factors, others clam shells. Ability to customize is important to some users, not at all to others.

The presence or absence of just one feature can tip a decision for or against a particular service, provider or device.

Part of the buying decision may be based on relative strengths of a family plan, or the way text messages are billed (flat fee, by the message) or packaged (unlimited use, fixed number of messages or a la carte).

So consider commodity broadband access. Comcast is rolling out its upstream Powerboost feature now in Denver, and expects to have it available in all markets in May. The service offers 6M bps cable broadband customers 1 Mbps upstream speeds for the first 5 megabytes of a large upload, and 8 Mbps customers 2 Mbps upstream speeds for the first 10 megabytes of a large upload.

The point is that Powerboost is one way to differentiate what would otherwise be a plain vanilla access service. Raw bandwidth matters. The degree of bandwidth sharing therefore matters. But so does pricing, packaging and features such as Powerboost. Lots of mass market end users I talk to really believe cable modem service is superior to Digital Subscriber Line. Some even question the value of fiber to home access services such as Verizon's FiOS, which seems to be experiencing at least some deployment glitches.

Communications might be a commodity in many ways. Its purchase almost never seems to resemble a true commodity, though.

100 Gig Backbones Needed by 2010

Simon Zelingher, AT&T Research Labs VP says his company will need to upgrade to a 100-Gbit/s backbone by the end of the decade in order to keep up with bandwidth demand driven by video and multimedia applications. AT&T recently quadrupled capacity by moving to one global OC-768 (40 Gbit/s) core, but that bandwidth is being eaten up more quickly than the telco expected.

One 40-Gbit/s DWDM system in one point of presence, capable of carrying 80 wavelengths at full capacity, was already 25 percent full last fall. Verizon this week issued a press release saying that they were in the process of upgrading key backbone routes from 10 Gbps to 40 Gbps.

Access bandwidth required for Internet access at 6 Mbps to 24 Mbps by 2010 is one reason. Access at 100 Mbps in a decade is another.

Vilfredo Pareto, Mobile Apps

Vilfredo Pareto, an Italian economist, around 1906 coined the Pareto Principle, popularly referred to as the 80-20 rule, "the law of the vital few" or "the principle of factor sparsity." It states that, for many phenomena, 80 percent of the consequences stem from 20 percent of the causes. As applied to any sphere of business or life, it means that a disproportionate share of the results come from 20 percent of the decisions, actions, people, partners, employees or just about anything else you can think of. The rule should therefore apply to virtually any part of the Internet or communications business, because it applies in any business.

If one looks at what is being bought out of the Handango catalog of more than 190,000 titles, across mobile platforms, and aggregating apps by type, you can see that no single category dominates. You might initially conclude that Pareto doesn't apply to the purchase of mobile apps. A different presentation of sales data--ranking sales or discrete items by volume or revenue--would clear that matter up.

Still, there's an important business implication here. It always is true that a small number of drivers (applications) account for a disproportionate share of sales. It also is true that as much as 80 percent of the actual apps sold represent niches important enough to users that they pay money to get them.

So fashion your business around the relatively small number of high volume items, or around the huge number of small and smallish volume items. Either way, it works. You just can't build the same sort of company to chase niches as you would build to chase the high volume segments of the market, if you want to succeed.

You might also be surprised at where the niches are. Handango says that in 2006, the top two selling apps for BlackBerry were "Ringtone Megaplex" and "Ringphonic Lite." Ringtones in a segment dominated by business users. The top two titles bought by Palm OS users in 2006? Quite different. "Agendus Professional Edition" and "Treo Voice Dialing" were tops there.

Still, across every major operating system, "business and professional" apps were the top category, followed by "productivity", then "entertainment," "games," "travel," "utilities," "communications" and "multimedia."

Can You Survive the IP Shift?

A few of you are familiar with a story I’m fond of telling. Once upon a time my market research company started to get asked what would happen if Congress passed a new telecom act. This was 1994 and 1995. The truth was, we weren’t sure. To make a long story short I embarked on a personal research program to figure that out, and ultimately boiled my findings down to about a dozen bullet points.

Roughly at the same time, I started getting asked what the actual cost of a phone call was, and where that all would sort out. To make a long story short, I wound up with a concept I have called “near zero pricing” ever since. And, ever since, I have urged everyone to build their business models on that premise.

More recently, new questions are being asked. Many successful providers of voice-centric services are asking whether they can remain relevant, and prosper, in an IP world where so much value and revenue conceivably shifts to application providers, and is not captured by “network services” providers.

My off-the-cuff answer has been that “100 percent of those of us who survive this shift will be providing all sorts of Web services and applications beyond basic ability to make, store, forward and retrieve voice messages.”

The inevitable next question is “what are those things and what do I do to create and deliver them.” That’s an open question, but has to be operationalized, and soon.

There’s a third question I now am set upon deciphering: what does the communications business look like after wider IP transition allows latent demand to surface. Put another way, there are lots of problems end users have that we haven’t been able to profitably address with TDM solutions.

All that is about to change. We are going to witness the emergence of all sorts of market segments and niches that we now can serve profitably, and this will happen all over the place.

The issue is to discover precisely how the process will unfold, so we’ll know where to focus our time and money to capture this newly-visible demand.

Another observation is that network services providers no longer can do everything themselves, and they know it. “MetaSwitch is at the heart of this transition of our business,” says Sylvie Couture, Télébec’s chief technology officer, about the ways MetaSwitch provided extensive professional services, not simply “a switch platform” to the Quebec-based carrier.

Other infrastructure providers also offer evidence that such things as a complete redesign of the entire IP network often cannot be done as well by carriers themselves as by their supplier partners. This understanding needs to be extended further into the application development process.

Also, the idea that voice services are a commodity needs further and serious reexamination, because it probably isn’t true at any level except in the sense of raw transmission of bits.

Consider softphone technology, to use but one example. The issue isn’t whether soft clients replace physical phones, but how and why soft clients work for people. There are many applications, and many settings, where a soft client makes more sense than a physical hand set or desk set.

Wainhouse Research surveyed enterprise end users and found that soft clients had already been purchased by 24 percent of respondents, while another 20 percent saw this as a future purchase. Obviously, there are some places where softphones make more sense than physical instruments.

In a completely superficial—but real—sense, if you can talk real-time through your PC, and you can get your voice mail there as well, and you're already comfortable using a Bluetooth headset, maybe you don't need a traditional phone.

The point is that if voice is not a commodity—and my contention is that IP is going to prove this is the case—then those who make the transition and prosper are those who can move adroitly to create voice services that aren’t commodities.

My guess is that every user of communications can point to ways that various modes of voice, on different devices, used at different times of day or week, to communicate with different people about different things, already exist. And we’ve just started to make the shift.

And my point is that these various modes of communicating are in fact not completely functional substitutes for the other modes. If they were commodities we wouldn’t bother using the various modes in different ways. Again, to use a crude example, mobile voice is not completely a functional equivalent for POTS. If it were, people wouldn’t be willing to pay so much more for the service, or use it as readily as they do.

POTS is a different product from some forms of over the top VoIP. Both are different from some forms of IM-based or soft client voice used on a PC platform. DIDs get used in different ways than they used to. People who use voice white lists and black lists are different from people who don’t know what the difference is.

Now, to answer some possible objections that might be forming, if voice is very much contextual, and not a commodity, then even when the “raw” cost of talking is very low, the value might be very high. Voice is not POTS. Voice is not simply mobile, or IM, or a soft client experience. Sometimes it is click to call. Sometimes it is enhanced with video. Sometimes it is synchronous. Sometimes it is asynchronous.

Sometimes it is a voice SMS. Sometimes it is a voice post on a Web site, rather than a text post. Sometimes it is integrated with podcasting. In the future it might be integrated with a video experience. Sometimes it flips from one device to another, mobile to fixed, or fixed to mobile. Sometimes it is personalized for friends and family. Other times it is screened and filtered for work.

At times it might be integrated with some sort of collaboration, such as review of some sort of document. It might be launched from inside an enterprise application, an email, an IM, a Word document or spreadsheet. At other times talking on a device recognizable as a phone is just fine, with no need for image or text support.

I stand by my contention: 100 percent of today’s voice practitioners who survive the IP shift will have found ways to unlock voice from the plain vanilla box it now is in. All of the survivors will have found ways to customize the voice experience for latent demand that is going to surface.

And 100 percent of those survivors will have found ways to use new IP-based tools to innovate faster than IMS or the core network protocols will permit. You want different answers? Ask different questions.

Sprint Nextel WiMAX Launches This Year

Sprint Nextel announced initial service launches in several markets by the end of 2007 and expects to reach 100 million people across the country by yearend 2008. Sprint has chosen Samsung for PC cards available in both single WiMAX mode and dual CDMA 1xEV DO/WiMAX mode for WiMAX service launch use. Additionally, Sprint has selected ZTE Corporation to supply multiple WiMAX 802.16e devices including PC cards in express and USB form factors as well as advanced modem solutions. Sprint Nextel also chose ZyXEL Communications for modem products.

WiMAX service areas for the 2008 launch include Chicago, Detroit, Grand Rapids, Indianapolis, Kansas City and Minneapolis. Samsung will develop Baltimore, Boston, Philadelphia, Providence and Washington D.C. Nokia will develop Austin, Dallas, Denver, Fort Worth, Portland, Salt Lake City, San Antonio and Seattle.

In large part, Sprint Nextel's early success will be determined by customer demand for high speed access services. In part that is because Sprint Nextel seems to be focusing its WiMAX effort on non-voice services supported by mobile data devices. The other reason is that sharing photos, Web content and ringtones, the leading 3G apps, can be provided on the existing network.

The Sprint WiMAX mobile broadband network will use the company’s 2.5GHz spectrum holdings, which cover 85 percent of the households in the top 100 U.S. markets.

The Only Question: Who Buys Vonage?

Pundits used to kick around the idea of "who will buy Vonage?". We are going to find out. With the noise around patent infringement no help, the stock price has dropped to the $3 level. So Vonage's life as an independent company is drawing to a close. Now, to be sure, Vonage executives probably always assumed they would be acquired, someday. That it would be such a "distress" sale probably wasn't comtemplated, at least not initially. No cable company is going to touch it, so that leaves telecom segment players as the only conceivable "network service" buyers. It isn't so clear what value Vonage might represent to application providers. I haven't done the math yet, but at $3 a share, buying the company probably gets close to "customer acquisition cost" for at least some potential buyers with a srategic need for wireline VoIP customer base and associated platform elements. In any event, we are going to find out.

HDTV Bandwidth Planning

One of the thorniest questions faced by all access providers is how much bandwidth will be required to support high definition and other forms of TV. Operationally, the discussion tends to turn on how many simultaneous HDTV streams might be required. The thinking in some quarters is that only a single HDTV stream and one or two standard definition streams will have to be supported concurrently.

SureWest Communications is planning to support multistream high definition DVRs and that will require additional bandwidth, says Bill DeMuth, SureWest Communications CTO. "We are already experiencing about 1.5 HD TVs per home so that is two streams, and if you want to watch one and record two streams it can easily lead to three to four streams of HD being delivered at the same time.

EarthLink Introduces Wi-Fi Phone

And it's attractive in the way an iPod is. No mistake, no doubt. About what one would expect from a company that has consumer marketing in its genes.

The phone is manufactured by Accton Technology Corporation and currently is in beta use at the company’s municipal wireless network in Anaheim, Calif.

EarthLink has no illusions about the difficulty of moving its business model forward, after beginning life as a dial-up Internet access provider. Still, it has a better shot than most who began business life that way, and already has done better than many would-be VoIP providers.

It always will be tough to compete with the cable and telephone companies, so you have to appreciate EarthLink's grittiness, toughness and marketing savvy. As they say, "thumbs up" for the phone design.

PhoneGnome Adds Gtalk, MSN, Yahoo!

The PhoneGnome free calling community now includes GoogleTalk (Gtalk), MSN Messenger, and Yahoo! users. PhoneGnome users can now also place free VoIP calls to users on GoogleTalk (Gtalk), MSN Messenger, and Yahoo!

These destinations can be entered in the ‘Quick Call’ box or added to a users' on-line Contacts and called with click-to-dial or by dialing the assigned speed dial code directly on your phone (for PhoneGnome box owners).

The PhoneGnome free calling community now includes:
* All PhoneGnome members, whether web-only, PC, or box, all over the world
* SIPphone/Gizmo Project
* Free World Dialup
* EarthLink MindSpring (formerly Vling)
* Hundreds of additional VoIP services reachable via SIPbroker
* Any SIP user, anywhere in the world (including Asterisk PBXes
* Millions of numbers reachable free through our private peering relationships
* ISN/ITAD numbers (freenum.org)
* GoogleTalk (Gtalk)
* MSN/Live Messenger
* Yahoo! Messenger
* PhoneGnome box users can even use a regular phone as a Skype phone.

"Each day, we get one step closer to pure Internet free calls to everyone," says David Beckemeyer, Televolution CEO.

Application Optimized Phones

Danger. BlackBerry, iPhone. Someday soon, Google phone. Just a few illustrations of the development of application optimized phones. Not application specific, as they are multiple function devices. Rather, optimized for a particular set of functions, with voice as a lowest common denominator

"Some of the time the engineers are dedicated to developing a mobile phone," Google executive Isabel Aguilera is quoted as saying on the Spanish-news Web site Noticias.com.

Simeon Simeonov, Polaris Venture Partners partner, has been told the Google Phone will be a BlackBerry-like device running C++ at the core with an operating system bootstrap, or loading program, and optimized Java, and that it would offer VoIP.

Rumors also link Google and Samsung as partners developing a phone, code-named "Switch." Google and Samsung announced a partnership in January to bundle mobile versions of Google Search, Google Maps and Gmail on certain Samsung phones.

Google has on its payroll Andy Rubin, the founder of handheld device maker Danger who later started Android, a mobile-software maker that Google bought in 2005. Google also acquired mobile-applications company Reqwireless and secretly acquired a company called Skia, whose first product is a portable graphics engine that renders 2D graphics on handhelds.

Verizon Dangles Bait. Will Fish Bite?

Verizon is dangling financial bait in front of returning or new customers. Consumers who have chosen to use cable phones, computer phones or wireless phones for their primary lines can now add the reliability and security of a Verizon landline to their household for $9.99 a month for a year. Win back programs are a staple of the competitive communications business, so the mere fact of a win back offer isn't surprising. Even the promotional price, though quite promotional, is unheard of.

The key element here is that Verizon is signaling that it has had enough of competitor poaching, and is prepared to halt the erosion, even at the price of destroying its POTS line margins. The prize now is shifting to lines in service. Broadband may be foundational, but a customer relationship is key to upselling other services. If that is POTS, so be it. The worse thing at this point is stranded assets, not margin off a POTS line, necessarily.

Google, TV Spectrum Auction, GooglePhone

I will say in advance that this is merely a speculation, but look at some of the possible events headed our way, along with a rumor gaining more credence. The rumor is that Google has 100 people working on some sort of Google phone. Then there is the matter of what happens in 2009 when the analog TV broadcast system is shut down, and a block of really valuable spectrum, at frequencies that penetrate walls quite nicely, are available for some other use.

Google is among companies that "really doesn't want to be a communications service provider," and there are good reasons for that being its actual position. But things change. What if wireless service providers "pull a Viacom" and play hardball on approving use of the Google phone, much less actively pushing it. What if Google finds it has no really good choices for ramping up its presence in mobile search, presence and location?

There's all that truly wonderful spectrum being vacated by the TV broadcasters. They will fight to keep it, of course. They'll talk about how they can compete with cable and telcos and satellite broadcasters by switching to digital TV in the same spectrum. Just as obviously, other economic interests who would be in a position to gain from rights to use that spectrum will actively oppose any such notion.

But that's precisely where Google's rumored phone, along with its business need to move into mobile search, location and presence, might prompt a change of thinking about being a communications service provider. Of course, it also will consider partnering with others who really like running networks, to reduce its investment profile.

But there's the speculation. There might be times when application providers, despite their desire to avoid being in the networks business, simply can't get their primary mission accomplished without moving in that direction. Google has been dabbling in Wi-Fi access networks and investing heavily in data centers and backbone transmission. It might not be Google's first choice, but all that juicy spectrum is going to affect the thinking of all sorts of players out there, across the communications, media and electronics industries.

In Google's case, the value of owning spectrum and a network, along or with friendly others, is the opportunity to dramatically propel user dwell time with Google Docs & Spreadsheets, search, maps, Gmail and GoogleTalk. And since a mobile phone that doesn't connect to the public network isn't quite so useful, it will do that as well.

Comcast Adding 200,000 Voice Accounts a Month

Comcast is selling 50,000 wireline accounts a week, says Comcast CEO Brian Roberts. That’s 200,000 lines a month, or as much as 2.4 million lines a year. That’s just Comcast. Time Warner, Cox Communications, Cablevision Systems and other cable companies are adding more lines on top of that.

So wireline attrition does not necessarily benefit wireless companies as much as some might suspect or predict. Some analysts think 40 percent of all U.S. consumers will be “wireless only” in five years, for example.

In some Comcast markets, for example, including Philadelphia and the Washington markets, Comcast is selling 25 times more units of phone services than it is units of video, says Roberts.

Big Ditch or Small Puddle?

One's attitude towards any access net choice depends in large part on what one thinks one faces. If one believes that the path to the future is largely a matter of small steps, then an incremental approach to access bandwidth makes sense. If, on the other hand, one anticipates disruption, then a bolder choice might be better. Yes, the risk is magnified when a discontinuous access choice is made. But there is great risk if one believes one is going to have to jump a big ditch as well. If you are going to make it, you need to get a good running start and then stake everything on making the leap in a single move.

That's something of the background in all cable or telco considerations about bandwidth upgrades, compounded by the fact that mobile access has to be part of the solution. The point is, jumping a big ditch might require a bolder investment in advance of the leap. If you don't think a leap is required, incrementalism might work. Either way, one bets the business, though, so neither decision is without huge risk.

It is clear that the addressable revenue buckets are bigger than they used to be, there's more competition than there used to be, and markets are less predictable than ever. So the most flexible network has an advantage.

And networks wear out, no less than shoes, clothing or tires. They must be replaced periodically in any case, and every network encounters natural break points, where an incremental upgrade in performance is not possible. The issue is where that point now lies.

Vyyo 3 GHz: Bigger Pipes for Cable

Even back in 2005, before the YouTube, user generated video wave hit, cable operators were thinking the amount of bandwith they would be delivering in linear fashion would shrink, while on demand services would grow. Over the top Internet video only magnifies the trend. So it is no surprise that cable operators are looking at any number of ways to boost bandwidth without ripping up their hybrid fiber coax plants and going fiber to the home. After all, the consistent cable refrain is that FTTH is way too expense and HFC is much better.

Cablers are looking at signal compression and decoding, upgrades to 1 GHz bandwidth, creating smaller fiber-served neighborhoods, converting to all digital signal formats or overlaying new electronics on the existing plant to make use of non-traditional frquencies. Vyyo is one of the suppliers of an overlay system, and says it can boost downstream bandwidth by about double, and upstream bandwidth by 10 times, for something on the order of $125 investment for every home passed by the cable network.

That's the good news. The bad news is that every time an engineer adds an active element, serially connected to another active element in a network, reliability necessarily takes a hit. So the good news is that the Vyyo overlay dramatically increases bandwidth, at the cost of reduced network reliability.

If the 3 GHz Spectrum Overlay adds six elements in series on each fiber leg, then the reduced reliability can be calculated by multiplying the reliability of each single device (a number less than one)by the reliabilities of each of the other devices, to get the impact on system reliability. Obviously, multiplying numbers less than one by other numbers less than one can only go in one direction: down.

If one assumes a reliability of 100 percent--a device or system that never fails--you understand why telecom engineers are so fixated on 99.999 percent reliability for the entire network. Never mind that the goal is virtually impossible to meet for some services, as the terminal devices have reliabilities low enough to drop end-to-end performance below the targeted "five nines."

But that's why there is such emphasis on the telecom world on passive optical access networks. Telco outside plant technicians and engineers know just how labor intensive a system can be when it has many active elements in it. For the cablers, perhaps the overlay tradeoff is worth making. But it will come at a price beyond the capital investment, in the form of reduced network reliability. That's just the physics and math.

SIP Trunking, Even if You Have no SIP

Global IP Solutions has introduced Interoffice Voice Trunking, offering enterprise customers free, high-quality voice over their internal networks. And get this: IVT can be used even where an enterprise has TDM phone systems in place, using a gateway that converts TDM to SIP signals.

GIPS claims high-quality voice can be transmitted this way over any network, including the the public Internet. GIPS Solutions' products are fully compatible with the IP PBXs from Cisco, 3Com and Avaya as well as any other H.323 compatible PBX, including circuit switched telephone equipment. IVT runs on any Windows 2000 or XP server, which enables companies to extend the useful life of legacy hardware and also supports any broadband Internet connection.

Presence, Location, Existence

Google in 2005 filed a patent application regarding "a computer-implemented method of providing text entry assistance data, comprising: receiving at a system location information associated with a user; receiving at the system information indicative of predictive textual outcomes; generating dictionary data using the location information; and providing the dictionary data to a remote device." The concept might be looked at as a location-based communications service. It is more, we'd argue.

"Presence," the ability of a computer system to detect your present willingness and ability to communicate. "Location-based" services promise to tie your present location to your lifestyle and preferences. Google's patent goes slightly further. It would make possible not only location-variable messaging and communications, but time of day or day of week personalization as well. The system theoretically could alter the results of any active or passive "search" function based on your past history, time of day, day of week and actual location.

And, of course, it makes most sense for some sort of mobile device. "Presence" solves many problems related to the effectiveness and efficiency of communications. "Location-aware" features may help solve some additional problems (I'm hungry or thirsty. Where can I get something to eat?). Google's system could theoretically contextualize even one's life experience (If you hurry, you can catch an earlier flight; those size 4 pink Crocs you wanted for the granddaughter are for sale, or maybe even on sale, at the store one block ahead. You will want to ship them home and there's a FedEx Kinkos another block ahead).

Whether WiMAX?

Whenever the subject of slow moving telcos and broadband access choices come up, wireless typically is mentioned as the most hopeful alternative. So the latest incarnation of the wireless buzz machine is WiMAX, sharpened recently by Sprint Nextel's decision to use WiMAX as its fourth generation network platform, followed by Clearwire's initial public offering, successful by market measures.

Of course, I've been hearing this same refrain for two decades. And there's one surefire way to determine whether any proposed wireless technology is going to be disruptive (in other words, an important competitor to incumbents) is simply to follow the money. If any new wireless technology really is going to disrupt access markets, it has to remain under the control of an upstart, period. As soon as any platform is acquired by the incumbents, it ceases to be disruptive. Clearwire couldbe acquired outright, and still remain disruptive. It simply has to be acquired by a hungry company willing to upset the market.

But there are other important strategic factors to consider when evaluating the potential or the threat posed by wireless access technologies. The first is competition. The second is wireless transmission properties. For starters, most people who assume WiMAX will be mostly disruptive typically fail to consider how other wireless broadband service providers are going to react. Do you think incumbent
3G providers are going to sit by for very long and let Clearwire eat their lunch? And do you think wireline broadband incumbents will do likewise?

The last time we looked, independent telcos in the rural areas Clearwire has said are prime opportunities have begun to upgrade their networks for broadband. Then there are two broadband by satellite providers available in most, though not all, U.S. rural areas. They say the same thing as Clearwire: underserved market; less competition, or no competition, from cable and telcos.

On the other hand, mobility is a plus, and the basis for differentiating the service. And if one voice enables Clearwire, as the company says it will do, there is some ability to shift mobile customers away from their current providers.

On the bandwidth issue, though, Clearwire has to hope for modest--but not wild--success. The reason is that wild success kills the network. Recall that Clearwire, like any radio licensee, operates in a sliver of the radio spectrum. The radio spectrum is a part of the entire electromagnetic spectrum. Optical systems use visible light, can use every color of visible light (wavelengths) and so can carry
what is for all practical purposes infinite bandwidth. No radio system, operating in a sliver of the radio band, ever can do that.

Wireless networks can be reengineered to reuse whatever spectrum is available, of course. Still, at some point interference issues prevent unlimited reuse. The business impact is that any radio system has less aggregate network bandwidth to work with, and can allocate less of the practically available bandwidth to any single user. And the demands get worse as customer count rises and there is more contention for the available bandwidth.

So optical access always always has the advantage over radio, and gets more efficient as penetration rises. Radio gets less efficient as penetration rises. Sure, you can design the network for maximum reuse of the existing spectrum, which helps deal with bandwidth and penetration. But it also increases capital investment.

Still, the company has lots going for it. At some point, we are going to stop talking about how little broadband penetration there is and start talking about multiple subscriptions per home, and subscriptions per user. Wireless is not always a substitute for wired connections, but supplemental. The access game is not zero sum, as it is thought to be. And mobile broadband, in particular, is a service sold to
individual human beings, not places. So the market inherently is more elastic. Remember the difference between mobile phones and landlines. One is sold to people, the other to places.

Craig McCaw owns a good chunk of the company, and Craig is a smart guy. It has serious partners (Intel, Motorola, Bell Canada) and a $3.8 billion market cap. The company had $100 million in revenue last year. It could grow to $200 million to $300 million this year.

Still, there are issues. So far, the network footprint is modest, covering areas serving 8.6 million people, or less than three percent of the U.S. population. At the end of last year it had 206,200 subscribers. But it has licenses to coverage 250 million people. Still, the North American WiMAX market is expected to increase from the current 30,000 installed bases to more than 21 million by 2011. And mobile
WiMAX radios aren't available yet.

In the meantime, there's the matter of cash burn. It has to build networks, and that's expensive. Last year the company spent $1.1 billion. It will need to raise money money in 2008 to continue the build. All that said, in the end, whether Clearwire creates a serious alternative to cable and telco, 3G, other 4G and satellite broadband access services, remains to be seen.

If it remains independent, yes. If it is acquired by an incumbent, no.

Not Such Great News

Though it isn't yet clear how serious Verizon's patent infringement case against Vonage will turn out to be, it is hard to see how it is positive, overall, for any service provider targeting the VoIP replacement market as an "over the top" basis. We would assume that cable operators have not chosen implementations Verizon thinks infringing. At the very least, the royalty payments now impose a revenue drag of about 5.5 percent of revenues, if the judgment stands. Vonage still has the single largest number of VoIP subscribers, according to TeleGeography, but what that asset will be worth is just slightly more open to question.

Two Ways to Develop Apps...

...and neither is completely right. Mobile operators, no less than their wireline brethren, have to figure out now just what applications are hot, and how to build business models around them, but how to balance the walled garden with the over the top open approach to apps.

It's an old argument spun in new ways. Service providers traditionally have created the apps on behalf of end users, with modest success in some cases. The Internet, of course, changes everything. Now end users and third parties can develop as they like, without carrier permission. Neither the walled garden or the completely open approaches will completely exclude the other sort of approach, though.

Gatekeepers will still have a role in guaranteeing better user experience for some third party apps, as well as developing a few of their own apps. Most apps, though, are simply going to be delivered over the top. The real pinch points are going to come where the app involves real time services with high bandwidth requirements. In those cases, carriers often will emerge as providers of latency control and app context features.

As analysts at The Yankee Group see matters, Internet types will prefer flat rate pricing while service providers lean towards usage-based models. There is room for both, plus ad support. Hybrid models are the future.

Good for Users, Not for Service Providers...

Businesses can use fixed mobile convergence and VoIP to slash more than 30 per cent from their communications spend, according to researchers at Analysys. How? The same way prices have dropped in other areas of communications: bypass of the public networks.

"Companies are spending over 80 per cent of their call bill on mobile services," says Margaret Hopkins Analsys analyst. That's not surprising, if you consider that most people get mobiles sometime in their teens, and keep using them as they get older, as eMarketer suggests.

Google Phone?

This from Engadget. Venture capitalist Simeon Simeonov says Google has a team of about 100 people working on the Google Phone. The photo might be simply a represenation of what the user interface would resemble. That isn't the point. The point is that it looks like a buddy list. And it is possible that the buddy list becomes the hub of communications activity in many, perhaps most situations. All of which illustrates the importance of instant messaging as a metaphor for where a good chunk of communications is going. Which is to say, it works better when the people you want to communicate with can signal that they are available, right now.

Apple's Halo is Glowing

m Pacific Crest Securities says Apple computer unit sales are up 101 percent year over year, with revenue up 108 percent. This is the halo effect from buzz about the iPhone, following the iPod, both of which are raising brand awareness for virtually every product in the Apple family. Apple's PC market share also appears to have nudged up two points over the last six months, says Net Applications. Goldman Sachs predicts that iPod sales could approach 11 to 12 million units in the first calendar quarter of 2007. Morgan Stanley says iPhone interest is actually larger than what the market currently anticipates.

So it appears Apple's brand awareness and buzz is driving iPod and Macintosh sales now, and prepping the market for the iPhone which won't be widely available until later in the year.

In fact, iPod sales will pass 100 million units world-wide in April 2007. Magic.

One Trillion VoIP Minutes

Some 1,079 billion minutes of VoIP traffic were carried by service providers around the world last year, says ILocus. The data suggest over half of calls were for long distance national calls. Separate estimates by TeleGeography suggest global VoIP minutes amounted to just short of 72 billion minutes last year.

There were 37.5 million voice over broadband subscribers, an increase of 16.5 million subscribers over the year. The biggest growth occurred in the U.S., French and German markets.

In the VoIP equipment market, softswitch and media gateways sales generated combined revenues of $2.2 billion - with 36.9 million Class 5 softswitch licences, 34.8 million Class 4 softswitch licences and 48.2 million service provider media gateway ports sold worldwide.

Bandwidth Now Driven by Consumers

"About 85 percent of carriers want Ethernet intelligence embedded into the optical transport network," says Meriton Networks chief network architect Nick Cadwgan. 

In some cases that means the ability to create Ethernet tunnels through an optical network, so that the transmission fabric starts to become a service delivery fabric. 

In some cases, though, it remains important to transport TDM traffic through the optical fabric, as in the case of wireless backhaul, notes Emanuel Nachum, ECI Telecom executive. "You want to integrate TDM, SONET and Ethernet layers as part of the optical infrastructure," he says. And though it has gone unnoticed in some quarters, dramatic changes in transport bandwidth are starting to occur. 

There's a move to 1 gigabit Ethernet at the edge of the network, in part because that's what the cards now support," says Umesh Kukreja, Atrica executive. "Enterprise sites now are pushing 20 Mbps to 40 Mbps while data centers are putting in 10 Gbps links. "We're also seeing N by 1 Gbps paths carried within 10 Gbps wavelengths.

But there's an even bigger change going on. Historically, bandwidth demands were driven by business. 

From this point forward, they will be driven by consumer demand for IPTV and other applicatons. Cadwgan says that over the last 18 months the demand drivers have flip flopped and that telco requirements for consumer video, using IP transport, now are the single greatest bandwidth driver.

Even for service providers who serve small, medium or enterprise customers, there are key implications. Paramount among the changes are new buyer benchmarks for what bandwidth should cost. 

SureWest Communications, for example, offers a symmetrical 50 Mbps Internet access service for customers who take a premium bundle including unlimited wireless, wireline and premium video. On a sum of the parts basis the symmetrical 50 Mbps works out to something like $200 a month. When those consumer users go to their offices, they are going to wonder why their business bandwidth costs so much.

Likewise, even some independent telephone companies serving rural areas on a suburban fringe are planning now for residential access bandwidth in the 40 to 50 Mbps range, with a 10 Gbps "metro core" to support it. You might wonder whether this is "overkill." Not if the telco plans on delivering IPTV services. And executives also acknowledge that if competing cable operators start bonding channels to create 100 Mbps services, then there will have to be a competitive response.

All of which puts telcos and other service providers in an awkward position. Competitors are driving consumer bandwidth expectations and delivery, not the voice and data networks that used to be expected to provide such leadership.

iPhone Boosts Analyst Forecasts

Apple's iPhone will likely see positive acceptance when the device ships in June, according to research firm Goldman Sachs. Goldman points to a recent handset branding survey that was conducted in China, India, the U.K. and the U.S. as evidence that Apple's new gadget might yield positive results for the Cupertino-based company. Despite the fact that the survey took place before iPhone was debuted in January, the number of potential iPhone buyers is equivalent to 75 percent of the installed base of current iPod owners. Just under one-half of the potential buyers come from respondents who have never owned an iPod, and 71 percent of respondents in the U.S. indicated interest in a potential Apple cellular handset.

Separately, Morgan Stanley says they would be buyers of Apple on incremental revenue and operating leverage. The firm believes the market is underestimating the likely success of iPhone. They're raising their annual unit and revenue forecasts to better reflect iPhone interest levels.

Morgan Stanley expects sales of eight million iPhones in 2007. A survey of 2,500 US consumers found that more people are interested in buying an iPhone than the combined number of people who already own or are planning to buy a similar high-end device soon(23 percent of non-owners compared to 19 percent of owners).

Apple ranked as the fourth most desired multimedia handset brand in the U.S. even before the iPhone was ever announced, and 30 percent of U.K. respondents alongside 15 percent of U.S. participants suggested that they would switch carriers in order to get the handset they want.

In fact, it is dangerous to underestimate the Apple brand machine. That isn't to say the company doesn't occasionally produce a dud. Think Newton, Pippin or Lisa. Of late, though, it has been on a roll.

ABI Research late last year said a study it conducted suggested many prospective MP3 player buyers, including current iPod owners, would be likely to choose Microsoft’s Zune over an iPod.

Of course, forecasts can be quite wrong. When 1,725 teenage and adult US residents were asked whether they planned to buy an MP3 player in the next 12 months, of those responding they were likely to do so, 58 percent revealed they were “somewhat likely” or “extremely likely” to choose a Microsoft Zune player over the iPod or another MP3 player brand.

This 58 percent that were likely to go the way of the Microsoft Zune – all identified themselves as existing iPod owners. The respondents owning other brands, 59 percent, were also “somewhat or extremely likely” to purchase the Microsoft Zune as opposed to another brand – including the iPod.

But sales of the Microsoft Zune appeared to be trailing off rather quickly after a fast start last November, leading some analysts to believe consumer interest is waning. Which is why watching what people do, not what they say they will do, is so important.

The player, which stayed in the top 10 in sales in the Amazon.com electronics category for several days following its launch, has now nearly fallen out of the top 100, recently hovering around position 96.

However, that buzz appears to have been short lived. Whereas the iPod is expected to sell as many as 15 million players this holiday season, analysts only project Zune sales of about 300,000 to 500,000 units at most.

Steve Wilson, ABI Research principal analyst, even has argued that iPod users don’t display the same passionate loyalty to iPods that Macintosh users have historically shown for their Apple products. The survey revealed that only 15 percent of iPod owners said that they were “not very likely” or “not at all likely” to choose Zune.

iPod Worldwide Sales
Q4 2001 - 130,000
Q1 2002 - 57,000
Q2 2002 - 54,000
Q3 2002 - 140,000
Q4 2002 - 219,000
Q1 2003 - 80,000
Q2 2003 - 304,000
Q3 2003 - 336,000
Q4 2003 - 733,000
Q1 2004 - 807,000
Q2 2004 - 860,000
Q3 2004 - 2,016,000
Q4 2004 - 4,580,000
Q1 2005 - 5,311,000
Q2 2005 - 6,155,000
Q3 2005 - 6,451,000
Q4 2005 - 14,043,000
Q1 2006 - 8,526,000
Q2 2006 - 8,111,000
Q3 2006 - 8,729,000
Q4 2006 - 21,066,000
Total = 88,708,000

Consumers aren't willing to pay what Apple Inc. may ask for the iPhone but if the price drops they'll switch their mobile service to AT&T Inc. in order to get it, according to results of another survey.

Online market research firm Compete Inc. surveyed 379 people in the U.S., most of whom had heard of the iPhone and have shopped for an iPod, to find out how interested they are in the device.

Among the 26 percent of respondents who said they're likely to buy an iPhone, only one percent said they'd pay $500 for it. When Apple introduced the iPhone in January, it said it would cost $500 on the low end.

Forty-two percent of those who said they're likely to buy the phone said they'd pay $200 to $299. Just watch. You'll get early adopters at whatever price iPhone costs. Then lower-priced units will appear. At $300, demand explodes.

See What I Mean About the Phone?

It just looks industrial, compared to the design of the rest of the unit.

Verizon One, Competition Zero

Verizon is rolling out an all-in-one voice, data, and video center for the home riding on top of Verizon's FiOS service, though it looks like the first generation of the device will not have the planned Ethernet and Wi-Fi capabilities Verizon wants to add. The Verizon One makes VoIP phone calls, supports email access, limited Web searches, calendar functions and streaming audio as well as preview of digital camera images. "Limited" Web access means specific Verizon-approved content in the news, weather and movie listings areas are available.

The cordless phone available as part of the unit is a bit clunky looking, but will support Verizon's VoiceWing VoIP service, slated to be added to the FiOS bundle later this year. The Verizon One also runs Media Manager, the FiOS application that manages and routes all of a user's multmedia content to networked TVs, set-top boxes, and PCs. Hence the importance of Wi-Fi and Ethernet capabilities. The base unit apparently supports as many as five total handsets.

Presumably when the Ethernet capable units are available, users will be able to access any content on the Web. Multiple USB ports will be added to accommodate the peripheral devices. Verizon One can be located any place in the customer's home where there is access to a phone jack and an electrical outlet.

It's an interesting approach to creating a next-generation "phone" device. Some people won't like the look and feel of the cordless phone. And one would hope the walled garden content experience was intended as a way to simplify experience of the unit, not extract money from content suppliers. That said, Verizon will be climbing a wall of resistance for the device, since every other attempt to put a PC-style screen into "kitchen" areas in the home has flopped. I don't recall a combined "phone plus Web" unit, however. And we really won't know what demand might be until the full Ethernet and Wi-Fi version of the device is available.

Still, credit to Verizon for trying something new. The device might be attractive for quick searches as one is running out the door and doesn't have time to boot up a PC to grab information from the Web. In these "greener" days many users are powering down their machines when not in active use to cut carbon, so quick and simple information searches might be attractive. That at least has always been the theory about how a simple Internet access device could fit into a user's lifestyle.

But Nokia Says No...

The problem with market research is that findings can vary wildly from study to study. Nokia, for example, provides smartphone usage data that flatly contradicts other study findings. According to Nokia, messagng and voice drive the actual usage, not audio and video.

Audio, Video Drive Smartphone Use

Not email access, at least according to this data from ICM Research of users in seven countries.

Watch Wikipedia

Here's a trend you might not have expected. Wikipedia is one of the four most popular social networking sites, even though it is not of the "hang out with your friends or community" sort. In fact, you probably are among the users (including this one) that has come to expect and rely on the quality of most of the information available on Wikipedia, as well as the timeliness of the updating. If you had asked me whether so many human beings would help create a service so useful and so good, just because they wanted to help, I'd have said "no way." At least some times, what Web 2.0 proponents claim is true, is true. So in chatting with David Beckemeyer, PhoneGnome CEO, why would it not be able to create some sort of user research outfit (one hesitates to use the word "company") that essentially is a wiki, perhaps a private wiki for some purposes, and a public wiki for others? My point is that if IP-enabled applications and services are changing everything in communications and media, and changing many things in the learning and playing arenas, why is there not reason to believe it can change market research and analysis as well?

Fiber To Home Forecast

18 million homes by 2011, say researchers at Parks Associates. Normally I am more skeptical to the downside when evaluating nearly any sort of market forecast. This one, though, seems too cautious to me. We shall see.

Feature Creep: We're Doing Something Wrong

Anybody familiar with the vast array of features available on a Class 5 switch or a private branch exchange can tell you that most buyers of such platforms never deploy most of the features. Of the features deployed, most end users never use them. The same appears to be true even of the more restricted features available on mobile phones. Most cell phone customers don't use the camera, email, or gaming options offered by their wireless providers, according a survey by JD Power and Associates. Most are satisfied when they can simply place a call efficiently.

Survey respondents said they use the speakerphone option more than any other, but only 26 per cent of respondents said they used this function. Only 19 per cent of people say they use the camera on their mobile and a mere 16 per cent opt to play games. True, behavior is changing. But after decades of exposure, most end users use but a handful of features available from their advanced phone switches. There's a lesson there.